Advertisement

Blog

Google Seeks Hefty Royalties From Apple & Other Foes

{complink 2294|Google} wants a pound of flesh from {complink 379|Apple Inc.} for the use of patents owned by the wireless handset manufacturer {complink 12925|Motorola Mobility Inc.}, which Google has offered to buy.

Reports indicate Google may demand that Apple and other rivals in the mobile handset market pay as much as 2.25 percent of the unit price of their products for the use of Motorola patents. Apple and the rest of the competition are bound to challenge this request in court and press for concessions based on patents they control, but recent court rulings have shifted the advantage heavily in Google's favor.

At best, Google could end up with billions in annual royalty receipts from competitors. At worst, the deep Motorola intellectual property portfolio could help Google ease out of its court problems with Apple and continue advancing the Android operating system without fear of constant challenges. This, of course, would also help Android licensees like {complink 4751|Samsung Electronics Co. Ltd.} reduce or eliminate royalty payments to companies like {complink 3426|Microsoft Corp.}.

A letter sent yesterday to Gordon Day, president of the IEEE, spelled out how that future is likely to unfold. It detailed Google's terms for the use of Motorola patents by other technology companies after the acquisition, which is expected to close this quarter. Google didn't mention any current or potential patent users by name, but it's clear that Apple and Microsoft are most likely to be impacted.

Motorola is locked in a patent war with both Apple and Microsoft. It clinched victory in one courtroom battle in Europe when a German court ruled that Apple was in violation of a Motorola patent related to the iCloud service. Motorola won another case in Germany recently, this one focused on cellular communications. The ruling in that case has been suspended pending an appeal, and Motorola has to post €100 million ($132 million) in collateral if it wants to enforce the iCloud injunction.

Clearly, the players in this war have become more aggressive in the last year. They have shifted from simply winning customers' hearts and minds to using legal tactics to cripple the competition. Apple, Google, Microsoft, HTC, and Samsung are locked in numerous lawsuits in courts worldwide. Apple has won injunctions against Samsung in Australia and Germany, but it has been dealt setbacks by courts in both countries in its efforts to curb alleged infringements of its patents.

Google's latest move raised the stakes significantly for all parties involved, but especially for Apple, which in some ways has become the biggest competitive target as a result of its overwhelming success in the smartphone and tablet markets. In fact, Google and Apple are arch-enemies — in his authorized biography, the late Apple CEO Steve Jobs vowed to do whatever he could to clip Google's wings.

It's understandable, therefore, that Google would be aiming its biggest guns at Apple. Buying Motorola would add tremendous firepower to Google's arsenal. The thousands of patents in that kitty would help Google protect itself against legal actions and put a squeeze on Apple.

Google has already started tightening the screws. The letter to the IEEE purportedly showed its commitment to the industrywide practice of FRAND (fair, reasonable, and nondiscriminatory) use of engineering patents. But it also served as a warning to the competition that Google expects to be compensated for the use of the patents.

In the letter, Google wrote that it would honor Motorola's “commitments to license the acquired MMI Essential Patent Claims on RAND terms,” though it would require payment of “a maximum per-unit royalty of 2.25% of the net selling price for the relevant end product on a go-forward basis, subject to offsets for the value of any cross-licenses or other consideration received from the licensee.”

What this means in practical terms is that Apple could end up paying 2.25 percent, or as much as $15 per iPhone, to Google if it uses or infringes upon any of the Motorola patents. This could add up to hundreds of millions of dollars quickly if Apple continues to sell tens of millions of iPhones and iPads each quarter. Additionally, enforcing the patents could give Google considerable leverage in negotiations for cross-licensing agreements with Apple.

I believe we are entering a new phase in this patent war that could lead to the end. There will be additional skirmishes, but in the end, it is in the best interests of all the parties to settle, agree to cross-licensing of disputed patents, and focus their energies on beating rivals squarely on the strength of their products.

26 comments on “Google Seeks Hefty Royalties From Apple & Other Foes

  1. Nemos
    February 9, 2012

    Considering the article I want to ask you, if you see this new twist in the patent law conflict as an opportunity for Google to surpass Apple in the smart phone market. In other words, should Apple be very worried about the situation that occurred.

  2. Barbara Jorgensen
    February 9, 2012

    This is a tangled Web indeed. It doesn't seem like the royalty Google is seeking is unreasonable, but I'm sure this is all about the bigger picture in terms of patents. If a patent is upheld or not upheld, there's a chain reaction to either result. I think that's why the parties are unlikely to settle, even though that makes the most sense.

  3. DataCrunch
    February 9, 2012

    I agree.  These companies are not going to sit around the camp fire and sing Kumbaya. I expect things to get more heated before there is any talk of settling.  Google acquired this IP portfolio and patents for a reason…to win.

  4. elctrnx_lyf
    February 10, 2012

    Wow, the patents of Motorola itself could make google a very rich company. $15 for each iphone sold could amount to millions of dollars in every quarter. 

  5. stochastic excursion
    February 10, 2012

    Seeing these corporate titans square off does make life a bit more interesting.  Generally contention has been limited to struggles between media companies, like the News Corp against Cablevision dispute.  At least with this challenge, customers are not finding themselves without service.

  6. jbond
    February 10, 2012

    I would have to agree that the best thing that could come out of this is agreements for sharing patents and just focusing on developing better products for the consumers. Unfortunately this is going to get heated up much more before any cooling down and settling comes into play.

  7. bolaji ojo
    February 10, 2012

    Jenn, The competitors want to win no matter what but I believe they are also hurting themselves with these legal squabblings. Google may seem to have the upper hand as a result of its Motorola Mobility acquisition but it's going to need patents held by or being acquired by other companies, including Apple and Nokia.

  8. jbond
    February 10, 2012

    I think another issue we need to look at is the governments involvement. Are these battles and aquisitions going to bring the heat of the government stepping in to try and stop any monopolies, particularly in the patent area. At some point some company is going to try and control everything and have an unfair advantage.

  9. saranyatil
    February 10, 2012

    Things will take a different turn once Government enters into these battles, to control the situation they cant take a stand on either side. Will make the scenario even more worst.

  10. _hm
    February 10, 2012

    It indeed is intricate matter. Lawyers are winner in this process. When is US govrenemnt's new patent law is coming into effect?

     

  11. t.alex
    February 12, 2012

    _hm, what is the change in new patent law? How would it affect this case of Google?

  12. itguyphil
    February 12, 2012

    Not could… it will amount to millions of dollars. Look at how Microsoft used their patents to make tons of $$ off of Android infringements.

  13. Wale Bakare
    February 12, 2012

    How would government intervene on the battles? It's absolutely court's responsibility to arbitrate on the matter.

  14. Houngbo_Hospice
    February 12, 2012

    Google and Apple are two big companies sitting on a wealth of assets and cash. Instead of entering in an overt battle against each other they should rather first look for ways to help the country recover from the economic downturn. But apparently that is not their primary concern (that is my opinion).

  15. JADEN
    February 13, 2012

    @electrnx_lyf

    The Motorola's patent is going to be lucrative for Google, the 2.25% looks small on paper but when the number plug into the sales of each iphone, that's big money for google.  Assuming Motorola has received 2.25% of last year's iphone sales in royalties, it would've earned billion of dollars.

  16. JADEN
    February 13, 2012

    @ Pocharle,

    Motorola Patent's portfolio has made Google open its wallet for billion $$$s.

  17. bolaji ojo
    February 13, 2012

    Patents represent a new source of revenue for high-tech companies. Most of these companies have previously hoarded the patents as competitive weapon. Now they are using them as if they were products. (See: Alcatel-Lucent Joins Ericsson, Kodak to Chase Cash From Patents.)

  18. bolaji ojo
    February 13, 2012

    _hm, The US patent law was constantly being reviewed by Congress. It was passed by the Senate in September.

  19. Ashu001
    February 13, 2012

    Bolaji,

    Your forgetting the company that started this patents for Royalty culture in the first place-Qualcomm.

    Its interesting that current discussions don't mention the role Qualcomm played in drafting most Patent laws (& the thoughtprocess on royalties from them)initially.

    Ashish.

  20. Wale Bakare
    February 13, 2012

    Wealth of assets those companies have comprise IPs, part of business portfolios which i think, have help transformed them to giant technology icons in the world today. Nevertheless, both originated ideas and acquired ones must be protected well enough so as to keep them in business.

     

     

  21. bolaji ojo
    February 13, 2012

    Ashish, Certainly, Qualcomm played a role in fueling the “royalty-rush” but it is not alone. ARM's business is all about the patents; it sells no products directly itself. What's happening is that some companies that previously saw their patents as the defensive weapon to deploy in support of their products are now beginning to see the value in simply letting companies license the patents.

    Patents trolls too are in the market, buying up patents and then seeking payments for alleged violations.

  22. Ashu001
    February 13, 2012

    Bolaji,

    How do you suggest we solve this impasse?

    Patent Trolls are a big-big problem for sure.

    In most companies today,innovation is becoming a side-show to litigation.

    This has to change and change very quickly now.

    Ashish.

  23. FLYINGSCOT
    February 13, 2012

    I often read about litigation between companies.  I also see large awards being made.  However I wonder if ever money changes hands or are countersuits simply raised or patents bartered instead.

  24. _hm
    February 13, 2012

    On TV news I listened about this. But, I do not have much details.

     

  25. saranyatil
    February 14, 2012

    I am just thinking if its going to incur loss to Google or make money to Google.

  26. itguyphil
    February 17, 2012

    It's a nice position to be in IF you are the one to profit from it. It is amazing how the law is used to stunt innovation and genuine collaboration.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.